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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






2. The lost net benefit to society caused by a movement away from the competitive market equilibrium






3. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






4. The price of a good measured in units of currency






5. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






6. Entry of new firms shifts the cost curves for all firms downward






7. Ed = 8 - infinite change in demand to price change






8. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






9. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






10. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






11. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






12. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






13. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






14. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






15. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






16. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






17. The most desirable alternative given up as the result of a decision






18. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






19. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






20. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






21. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






22. Costs that change with the level of output. If output is zero - so are TVCs.






23. The difference between total revenue and total explicit and implicit costs






24. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






25. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






26. All firms maximize profit by producing where MR = MC






27. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






28. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






29. AVC = TVC/Q






30. Demand for a resource like labor is derived from the demand for the goods produced by the resource






31. The ability to set the price above the perfectly competitive level






32. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






33. The additional cost incurred from the consumption of the next unit of a good or a service






34. The output where ATC is minimized and economic profit is zero






35. Models where firms are competitive rivals seeking to gain at the expense of their rivals






36. The change in quantity demanded resulting from a change in the price of one good relative to other goods






37. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






38. The sum of consumer surplus and producer surplus






39. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






40. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






41. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






42. Ed > 1 - meaning consumers are price sensitive






43. The marginal utility from consumption of more and more of that item falls over time






44. Two goods are consumer substitutes if they provide essentially the same utility to consumers






45. The mechanism for combining production resources - with existing technology - into finished goods and services






46. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






47. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






48. ATC = TC/Q = AFC + AVC






49. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






50. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials